Keynesian and Monetarist Economic Theories

There are multiple conditions that occurred in the US that aided in the economic downturn leading to the Great Depression. Prior to the stock market crash of 1929, a classical approach, advocated by Adam Smith, was how America felt its political and economic system functioned. Adam Smith’s classical approach is embedded in the concept of a laissez-faire economic market, which suggests that the US would thrive if left alone (lecture). This approach requires a noninterfering government and allows individuals to follow their own self-interest, which was supposed to keep economic order (Cochran & Malone). Additionally, as discussed in lecture, this theory assumes that markets are inherently stable, self-adjusting and self-regulating, and

The US economy, as anybody would expect, has gone through its ups and downs. Some believe that our new president has a brilliant plan to create a phenomenal economy for our country. Others believe that his economic policy will take our country to the worst state it has ever been. Throughout our history, various styles of economic policy have been commonly believed. In the early 1900’s most economists believed in “classical” economics, this is the idea that the economy will work better when the government is more hands off. This can be thought of as the purest form of capitalism that has been attempted. In the late 1940’s, most US economists began to follow “Keynesian” economics. This form of

On October 29th, 1929 the stock market crashed and more than 10 billion dollars vanished within five hours. It is hard to imagine being in the 1920s and trying to withdraw your deposit from the bank and the bank in the not being able to give you your money back. So instead imagine this modern day scenario: you go to the grocery store and when you reach the check out you are try to use your credit cards and are unable to. Thinking this was a banking error you go to the bank and it is closed, completely abandoned, and now you have no way of paying for food, gas for your car, or any other necessity. There is no way of knowing if a national depression of the same magnitude of 1929 could or could not occur again economists are constantly debating

One type of economic belief is called Keynesian economics. This belief or theory is in favor of total spending in the economy. It also agrees with total spending output and inflation, prices of goods rising consistently. This form of economics was developed in the 1930’s by a economist, John Maynard Keynes, in hopes of gaining a better understanding of the Great Depression. Keynes was for more government spending and lower taxes that would possibly pull the U.S. out of the depression. Basically, this gave hope that America’s government could get out of its low production time by stabilizing goods. Before the idea of Keynesian economics, people believed that the fluctuations in the output of manufactures would handle itself. The flaw in this

John Maynard Keynes was the most influential economist of the 1900’s and many of his ideas were adopted by Franklin D. Roosevelt to combat the Great Depression of the 1930’s. With the passing of the economic crisis in 2008, countless articles have been published supporting Keynes and his economic thought. He originally investigated the origins of the Great Depression and remodeled the field of economics with a basic conclusion: economies recover from downturns by spending money. Keynes theorized that during financial downfalls, the public becomes frightened and decreases spending, this leads to more layoffs, which in turn leads to an even greater decline in consumption, creating a vicious cycle. Many of Keynes’ theories in The General Theory of Employment, Interest, and Money (1936) are accurate, but are often overlooked in the legislative sector, due to political agendas triumphing over logic. “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street . . . cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism.” I will be addressing Keynes’ concept of business cycles in The General Theory of Employment, Interest, and Money—mainly focusing on the 2008 financial crisis—and analyze whether or not these arguments are more or less accurate than his other conclusions. I strongly believe that many of his ideas are true as he

John Maynard Keynes was the most influential economist of the 1900’s and many of his ideas were adopted by Franklin D. Roosevelt to combat the Great Depression of the 1930’s. With the passing of the economic crisis in 2008, countless articles have been published supporting Keynes and his economic thought. He investigated the origins of the Great Depression and remodeled the field of economics with a basic conclusion: economies recover from downturns by spending money. Keynes theorized that during financial downfalls, the public becomes frightened and decreases spending, this leads to more layoffs, which in turn leads to an even greater decline in consumption, creating a vicious cycle. Many of Keynes’ theories in The General Theory of Employment, Interest, and Money (1936) are accurate, but have often been overlooked in the legislative sector, due to political agenda triumphing over logic. “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street . . . cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism” (Keynes Ch. 12, Pt. VI). I will be addressing Keynes’ concept of business cycles in The General Theory of Employment, Interest, and Money—mainly focusing on the 2008 financial crisis—and analyze whether or not these arguments should be taken as more or less accurate than his other conclusions. I strongly believe that many of his

In 1929, the stock market crashed. The values of production gone down, work force lost their jobs, millions of families lost their homes as well as millions of saving accounts were lost because banks closed for good. Those events resulted in the Great Depression. As a result, the world was plunged into economic turmoil. However, two prominent economists emerged with competing claims and sharply contrasting approaches on how a capitalist economy works and how to revive it when depressed. John Maynard Keynes an English economist believed that government has responsibility to intervene in an economical crisis whereas, Friedrich Hayek an Austrian-born economist and philosopher believed that the government intervention is worthless and

I agree with this statement. This phrase gain meaning during the global financial crisis of 2008. This technique has been used by the government to bail out many companies, so that they would not go under. Consumers at this time were hesitant on spending their money, which meant less demand for products. This also hurts the employees because now they are at risk of losing their jobs, causing the unemployment rate to rise. In order to bring the economy out of a recession according to Keynes the government should intervene and provided financial support.

The essential purpose of Milton Friedman’s theory of free markets was to help the economy as a whole stabilize or dig itself out of recession (Ip). He envisioned economic recession as an opportunity for the market to independently pull itself out without the help of the government. Milton Friedman’s fundamental idea in his free market theory was that government intervention should be very limited and the markets should be the ones that are responsible for stability (Ip). Compared to the Keynesian theory by John Maynard Keynes, Friedman’s ideas are seen as a “laissez-faire”, or a policy that involves very little interfering and letting the economy take its own course (Ip). This poses a potential problem to the unemployed or lower class people because according to free market theories, the government cannot provide the necessary help as in creating jobs or lowering tax. In summary, Friedman’s theory may help the economy stabilize by letting the markets do business as they wish, but it will put some people at risk of impoverishment (Ip). As it is understood in Friedman’s theories, his views could be considered fairly insensitive to the people who do not have an opportunity to get themselves out of recession without help. Although the government tried to help the people who needed financial aid, Friedman regarded the Government’s help as a risk for

This paper will be discussing the Great Depression; it will analyze the causes and the events that led to this depression, focusing on the role of Keynesian economics during that time. This article will briefly compare the 1920 downturn with the great recession and discuss the possibility of another depression affecting the world economy.

Keynesian economists proposed that the way to escape the Great Depression was through a combination of two approaches. First to reduce interest rates. Second, the government should begin investing in infrastructure, which injects money into

The U.S. never fully recovered from the Great Depression until the government employed the use of Keynes Economics. John Maynard Keynes was a British economist whose ideas and theories have greatly influenced the practice of modern economics as well as the economic policies of governments worldwide. He believed that in times when the economy slowed down or encountered declines, people would not spend as much money and therefore the economy would steadily decline until a depression occurred. He proposed that if the government injected money into the economy, it would help stimulate consumers to purchase more and firms would produce more as a result, in a continuous cycle. This cycle is called the multiplier effect. Keynes ideas have

Based on the theories of neo-classical economics, Greener (2008) proposed two main types of benefits of the promotion of markets in welfare service delivery: 1) empowering purchasing power of service users; 2) improve competition and efficiency of providers. These benefits of marketization represent in the field of care for older people. First, the market provision empowers service users to ‘exercise consumer sovereignty’ (Greener, 2008) through greater opportunities of choices (Daly and Lewis, 2000; Drakeford, 2007). In respect of this, the market could improve quality of services and push the older care move from producer-driven to consumer-driven provision. Second, market mechanism emphasizes the improvement of quality and reduction of costs through competition among providers, which inherently promotes efficiency (Brennan et al., 2012). Yet, there is no agreement of all these benefits has been taken place in practice or not. For example, Lewis and West (2014) argue that changes in ‘greater choice’, ‘flexibility’, and ‘responsiveness’ is very little, but the cost has been saved indeed.

The 1930’s saw the neo-classical model of economics, championed by Walras and Mengers, crumble as rates of unemployment rose exponentially on a global scale. In the midst of this economic crisis Keynes offered solution to the crisis in his 1936 ‘General theory of Employment, Interests and Money’. He successfully argued that the state was alone capable of steering the economy to produce ‘social stability and social justice’ (Valentine, 2003) Thus the post-war consensus was formed and consequentially the centre ground of politics redefined, Keynesianism socialist model would hold sway for the quarter century following World War II.

Our economy has evolved from centuries ago to what it is today from the start of supply and demand and learning how to make trades. The foundations of this learning process has also came from theories on how to manage and control the economy. This has been built from several thinkers and theorist implanting their ideas into action and having results in the prosperity or failure of an economy. As these theories have evolved as well and some with great prosperity they have been recognized and titled as the Keynesian School of Economic Thought as this is a theory believing aggregate demand is influenced by public and private economic decisions. There is also the Monetarism School of Economic Thought which focuses on how the money supply has